I didn’t know that?
This is a phrase we hear a lot, especially when someone sets up a limited company and especially in January when personal tax returns are due.
Here are our top 10 I didn’t know that questions
1 . I didn’t know that I needed a separate bank account?
Yes, a limited company is its own entity and funds held in a personal account will be deemed personal income and could attract tax. Therefor you will need to set up a business bank account for your limited company.
2. I didn’t know I had to register to pay myself?
Yes you need to register with HMRC for a PAYE reference and deduct tax and NI on your earnings. Note single director companies do not get the £5,000 employers NIC relief.
3. I didn’t know I paid tax on dividends?
Yes, you pay tax on dividends and these are declared on your personal tax return.
4. I didn’t know you had to make a profit to declare dividends?
Yes, dividends are a distribution of profits and not an expense. You need to prepare a profit and loss account, work our corporation tax payable and then you can declare a dividend.
5. I didn’t know I needed paperwork for the dividend?
Yes, you need a board minute and dividend voucher prepared on the day that you declared the dividend. Backdating to ‘FIT’ your accounts is illegal.
6. I didn’t know I had to keep accounting records?
Yes, HMRC require you to keep accounting records and the Companies Act. We recommend Xero as an accounting software provider. Giving over a years bank statements and records to prepare is expensive and you will have no idea of dividends you can vote if any.
7. I didn’t know I paid tax on monies taken from the company?
Yes, if you have borrowed from your company you will pay tax on your Corporation Tax Return. This is a holding tax that will be repaid once you are back in funds with the company.
8. I didn’t know my company had to register for VAT?
Yes, if you exceed £85,000 in a rolling 12 months you must register for VAT and in some cases it is better if you do register for VAT.
9. I didn’t know I couldn’t run my car through the business?
You can run the car through the business BUT it will be classed as a benefit in kind and you will pay tax on the benefit. Some cars are much better through a Limited company than others. Electric cars are a great benefit.
10. I didn’t know it was so complicated?
This is where a good accountant will help you manage your limited company so that you comply with the companies act, HMRC and help move your business forwards.
Take a look at this video:
